Fitch Upgrades Standard Bank Plc 'BBB+'; off Rating Watch Evolving; Outlook Stable
The removal of RWE follows the completion of the sale of a 60% stake in SB plc to Industrial and Commercial Bank of China Limited (ICBC; A/Stable/bb) on 1 February 2015. Although Standard Bank Group Limited (SBG; BBB/Negative) will retain a 40% stake in the bank, ICBC through relevant options and puts could acquire 100% ownership at a later date.
KEY RATING DRIVERS - IDRS, SUPPORT AND SENIOR DEBT RATINGS
SB plc's IDRs, Support Rating and senior debt ratings now reflect Fitch's view of the high probability that support from ICBC would be provided to its new subsidiary in case of need. Fitch believes that timely liquidity and capital support would be provided by ICBC, as indicated in ICBC's statement of support for its subsidiary.
ICBC's ability to provide such support is indicated by its IDR, which reflects Fitch's opinion that there is an extremely high probability that the Chinese authorities will support ICBC in the event of stress. ICBC is China's largest bank and is one of the global systemically important banks.
The two-notch difference between the bank's and ICBC's Long-term IDRs reflects Fitch's opinion on the limited integration (operational and managerial) and synergies currently in place between SB plc and ICBC. This considers SB plc's evolving role and franchise as well as the influence we perceive the minority shareholder to still have on running SB plc. This opinion is counterbalanced by the likelihood that any support would likely be manageable given SB plc's size compared with its parent's and the high reputational risk for ICBC if SB plc were to default. The Stable Outlook on SB plc's Long-term IDR mirrors that on ICBC.
In line with our criteria, we have also upgraded the long-and short-term senior unsecured debt ratings of SB plc's USD2bn global medium term note (MTN) Programme to 'BBB+' (from 'BBB') and 'F2' (from 'F3') in line with the issuer's IDRs.
KEY RATING SENSITIVITIES - IDRS AND SUPPORT RATING
The IDRs and Support Rating are sensitive to a change in Fitch's view of SB plc's strategic importance to ICBC or any change in the parent's ability to provide support. Our view on the latter is fully described in "Fitch Affirms China's 5 State Banks at 'A'; Outlook Stable, dated 24 November 2014 and available on www.fitchratings.com.
KEY DRIVERS AND SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
Fitch has not assigned a Viability Rating (VR) to SB plc, which would normally act as the anchor rating for its subordinated and other hybrid debt. However, in this instance, the anchor rating for SB plc's subordinated debt and subordinated perpetual notes is ICBC's VR of 'bb' and the notching applied to the debt reflects our assessment of each instrument's respective non-performance and relative loss severity risk profiles. SB plc's subordinated dated debt rating of 'BB-' reflects one notch for loss severity. Perpetual notes' rating of 'B+' reflects one notch for loss severity and an additional notch for non-performance risk.
The rating actions are as follows:
Long-term IDR upgraded to 'BBB+' from 'BBB'; off RWE; Outlook Stable
Short-term IDR upgraded to 'F2' from 'F3'; off RWE
Support Rating affirmed at '2'
Global medium-term note programme for senior unsecured debt: long-term rating upgraded to 'BBB+' from 'BBB' and short-term rating upgraded to 'F2' from 'F3'
Subordinated debt: downgraded to 'BB-' from 'BBB-'
Subordinated perpetual notes downgraded to 'B+' from 'BB'
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